Examining former online-only retailers such as Warby Parker, Bonobos and Birchbox that have rushed to open stores, and contrasts digital and retail KPIs for pureplay, evolved pureplay, and omnichannel retailers to illustrate how organizations can benefit from operating and investing across multiple channels.
The same challenges that plagued Pets.com and other dot bombs persist among pure-play e-commerce firms two decades later: unsustainable customer acquisition and shipping costs, and a discount-driven environment that erodes already razor-thin margins.
The latest crop of retail “winners” including Warby Parker and Casper originated online – however, their success is not a function of their channel, but their competitive set.
For example, the $65M subscription-service Dollar Shave Club’s success is not attributable to its online-only model, but to Gillette’s inflated margins in a consolidated industry with desirable ship-to-weight ratios.
Among thirteen VC-backed retailers, who launched online and then opened stores, two-thirds have recently raised capital to expand their brick and mortar footprint.
Opening stores is an investment that can offer return across channels. E-tailers with a storefront presence enjoy greater organic site traffic and lower customer acquisition costs.
Since opening “guideshops” in major cities, men’s retailer Bonobos was able to reduce digital marketing spend from 25 to 4 percent of net sales --without sacrificing organic traffic or conversion rates.
Amazon casts a shadow across any conversation regarding retail. The Seattle behemoth’s core competence is not operations or marketing, but a singular ability to raise capital without the expectation of profits. Moreover, the majority of the company’s operating income now comes from revenue streams outside of retail, specifically Amazon Web Services.
In sum, Amazon plays by a different set of rules in the public markets than other retailers, creating the fallacious perception that pureplay is viable - it’s not.